FINRA Highlights Regulatory Implications For Finance Firms In The Metaverse

According to Cointelegraph, the Financial Industry Regulatory Authority (FINRA), a non-governmental, self-regulatory organization, has released a report detailing the potential regulatory implications for securities and finance firms operating in the metaverse. The report provides an overview of the current state of metaverse activity within the finance industry and offers projections for the technology’s future. It emphasizes that both FINRA's rules and relevant government regulations apply to metaverse activities just as they would in other contexts. The report, announced on X.com, underscores the importance for member firms to consider their regulatory obligations when incorporating the metaverse into their internal systems, processes, or product offerings. Published on October 24, the report states, “Member firms should also be mindful of the potential implications to their regulatory obligations as they consider whether to incorporate the metaverse into their internal systems and processes or use this technology within product offerings.” The report highlights the significant revenue potential of the metaverse, projecting a global metaverse revenue opportunity of $800 billion by 2024 and an expected contribution of over $3 trillion to global Gross Domestic Product (GDP) by 2031. While metaverse technology is often associated with gaming and industrial applications, FINRA explored several use cases for the finance industry, including data visualization, digital twins, and virtual trading. The report also identifies several challenges facing the metaverse industry, particularly in finance. Security and privacy are among the primary challenges identified. Given the broad and somewhat nebulous nature of the term “metaverse,” ensuring that specific platforms meet the regulatory needs of financial institutions, brokers, and dealers is crucial for smooth adoption. The report stresses that despite the experimental nature of many business projects in the metaverse, these endeavors are still subject to the same legal constraints and requirements as any other dealings in the financial services industry. FINRA reminds its member firms that its rules, which are designed to be technology-neutral, and securities laws, in general, continue to apply if member firms use the metaverse in their business operations. The report states, “FINRA reminds its member firms that FINRA’s rules—which are intended to be technology neutral—and the securities laws more generally, continue to apply if member firms use the metaverse in the course of their businesses, just as they apply when member firms use any other technology or tool. Using any given technology does not absolve firms of their regulatory obligations.”